Energy Management

All part of the (energy management) plan: Accepting ambiguity

Peter Garforth says realities change. Successful energy management teams don’t let this derail their plans.

By Peter Garforth

The critical first step to achieving world-class energy and climate performance is the approval of a robust integrated energy and climate master plan for a specific site or even the entire company. Such a plan would recommend a comprehensive solution comprising energy management, energy efficiency, energy distribution and on- and off-site supply measures. This plan also would include provisional budgets and other resources and would specify that implementation will occur over a number of years. Even getting to this stage of planning is relatively rare, but this is the easy part compared with the challenge of consistent implementation. It is interesting to explore some of these challenges.

For the master plan to be credible and win approval, it must be pretty granular in terms of actions, investments, and anticipated technical and financial benefits. Once the decision to proceed is made, the plan passes to the leaders and team members who must implement it. All too often, a master energy plan can be interpreted as a pre-engineering plan rather than the valid, but broad, road map that it is. As implementation begins, there will be areas where detailed assessments require that some assumptions be adjusted. If this is understood as normal when translating strategy to action, things will keep moving. If interpreted as there being “something wrong” with the master plan, the entire process can collapse before it really gets underway.

Even if things start well, the passage of time will inevitably bring new dimensions to the plan. Business growth and production volumes will be what they are, not as what they were assumed to be in the original master plan. Actual utility prices and costs of carbon will change the economic value of various parts of the plan. Technological options and costs will change. Leadership and team members will change.

In the big picture, most of these changes can be absorbed with midcourse adjustments. Some may reduce or slow benefits somewhat; others will present unexpected opportunities. They will rarely be substantive enough to invalidate the strategic direction of a rigorous energy master plan. However, it is all too easy for the evolution over time to erode the credibility of the original plan – even to the point where it gets ditched and the cycle starts again.

These dynamics demand a special kind of leadership understanding when assigning management accountability to the team tasked with implementing a long-term comprehensive energy plan.  It must be held to deliver overall year-on-year energy and climate performance benefits while managing reality as it emerges.

At the same time, leaders need to be comfortable with delegating and with allowing a large amount of flexibility in finalizing and implementing detailed plan measures. This flexibility must extend to prioritizing measures and even technical approaches. There must be significant latitude in managing cost overruns and seizing unexpected savings opportunities within the boundary of the overall estimate.

The worst case is where leadership holds the energy team accountable for overall performance results while retaining a line-item veto over each implementation step or midcourse adjustment. Unfortunately, this occurs all too often. This misalignment of expectations will rapidly demotivate even the best teams and derail successful implementation.

The best case is where the leadership and the energy team understand clearly each other’s roles and accountabilities.  This demands a high degree of mutual understanding of the original master plan. It puts a high responsibility on the energy team to communicate effectively with leadership without getting stalled by seeking permission at each step, recognizing they will be held accountable for total performance. Of most importance, leaders must learn to accept ambiguity to achieve energy performance breakthroughs.

It is tough enough to create this management alignment with an internal implementation team. It is doubly difficult when a company wants to team with an external partner to achieve performance the master plan demands at the overall budget estimated while accepting the need for substantial flexibility in final implementation. Ultimately, this must be reflected in credible legal contracts that enshrine these accountabilities. This will demand a rare breed of lawyers – ones who can create legally binding ambiguity.